Oil advances as Opec+ supply boost vies with geopolitical risk

[SINGAPORE] Oil gained as a third straight production increase by the Organization of the Petroleum Exporting Countries and its allies (Opec+) vied with heightened geopolitical risk in Ukraine and Iran.

Brent crude for August rose as much as 2.1 per cent to US$64.09 a barrel, after losing 2.2 per cent last week, while West Texas Intermediate was below US$62. The Opec+ agreed on Saturday to add 411,000 barrels a day of supply in July, according to a statement.

The decision defied reports late last week that the group was considering accelerating the return of shuttered-in production by an even larger amount, which had damped prices on Friday (May 30). The quota boost matched those scheduled for May and June, and was in line with expectations in a Bloomberg survey of 32 traders and analysts.

Escalating geopolitical concerns helped support prices. Ukraine staged a dramatic series of strikes across Russia, deploying drones hidden in trucks deep inside the country to hit strategic airfields as far away as eastern Siberia.

Meanwhile, Moscow launched one of its longest drone and missile attacks against Kyiv, escalating tensions ahead of crucial peace talks this week.

Iran manufactured a record volume of uranium enriched just below the levels needed for nuclear weapons, The International Atomic Energy Agency said. The Islamic Republic criticised the report, which complicates efforts to negotiate a peaceful resolution to international concerns over the Islamic Republic’s atomic ambitions.

Crude remains almost 15 per cent lower this year, pressured by an ongoing trade war between the US and China, as well as the abandoning by Opec+ of their former strategy of defending higher prices by curbing output.

Opec+ officials said the quota boost reflected Saudi Arabia’s desire to punish over-producing members such as Kazakhstan and Iraq. Some members – including Russia, Algeria and Oman – had wanted a pause in the increases, delegates said. The group next meets on Jul 6 to discuss output levels for August. BLOOMBERG